Thursday, October 02, 2008

An Interesting Discussion of the Sources of Income Inequality

I don't usually use posts here to point at other people's posts elsewhere, but I just read a thoughtful discussion of the sources of increasing income inequality in a piece by Schultz and Kling and think some of my readers might find it interesting.

3 Comments:

> “Virtually all—92 percent—of children whose families make over $75,000 are living with both parents. On the other end of the income scale, the situation is reversed: only about 20 percent of kids in families earning under $15,000 live with both parents.”

I think it's a mistake to identify divorce as some sort of metric of failure for children. If the relationship was in enough turmoil to warrant a divorce, then a divorce would seem to error on the side of removing children from anti-social home situations and be an actual net gain to social welfare.

I'm fairly young and a product of the public education system, and I would like to point out that if drop outs have risen as a percentage, it's probably due to the absolute crap the system has become. The students get all the office politics an productive apathy characteristic of large organizations, without the benefit of actually getting paid to do it. After 10 years of such a system where your only motivation to succeed is social (since the vast majority can just as easily get GEDs and start at community college and then transfer to a real school by the end of high school) I would say, again, this is good sign that the aren't putting up with it anymore. Again, a gain in social welfare.

Good article on the whole, but I've always been more partial to the big four explanation.

... the claim is that both parents must work to make ends meet. A different explanation is more likely. As women have become better educated and live longer, the opportunity cost of staying at home instead of earning money in the marketplace is much higher.

OTOH, other couples becoming double-income must have some inflationary effect, both on the prices of things you would have wanted anyway, and on what things you want ("keeping up with the Joneses"), so one might reasonably expect that as the number of double-income families increases, there's more impetus for remaining families to become double-income.

Virtually all—92 percent—of children whose families make over $75,000 are living with both parents. On the other end of the income scale, the situation is reversed: only about 20 percent of kids in families earning under $15,000 live with both parents.

So how do you draw the arrow of causation? It's plausible that having two parents in a household makes child care easier, and allows the option of having two incomes. It's also plausible that poverty puts an added strain on relationships and makes divorce or separation more likely. And there are other factors (like being black or Hispanic, or growing up in an inner-city slum) that make both poverty and single-parent-hood more likely.